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Asset managers are allocating more to equities globally than at any point in over two years, but fresh concerns about a sovereign debt crisis in Europe are keeping investors bearish on stocks in the region.

According to the latest Bank of America Merrill Lynch fund manager survey, 57% of investors are now overweight equities – the highest number in more than two years. Overweight positions indicate that investors have allocated a greater percentage of their portfolio to an asset class, compared to the strategy benchmark.

The US bank surveyed 254 fund managers with $691bn in assets between March 8 and March 14 and found there had been a "big jump" in underweight positions in commodities over the period, from a net 1% underweight allocation to a net 11% underweight.

Investor fears have shifted from concerns about the US fiscal crisis to the EU sovereign debt crisis and deflation, with one in three respondents identifying the situation in Europe as the top tail risk – for the first time in six months, according to the survey.

As a result, Bank of America Merrill Lynch found that for the second month in a row, investors' allocations to eurozone stocks had fallen.

However, 40% of the European fund managers surveyed said they expected growth to be stronger over the coming year. “The readings suggest fewer investors fear a deflationary episode in Europe. Additionally, a gradual pick-up in inflation expectations is the most supportive environment for improving growth", the bank said.

In emerging markets, investors favour South Korea, Taiwan and Singapore, while sentiment has deteriorated on Australia, India and China. Overall overweight exposure to developing economies has fallen to 34% from the 43% recorded in February's survey – having previously risen for five consecutive months.